Gulf inflation contained amid global food price drop

A global drop in food costs and a weak property market are helping to offset increased government spending to keep inflation in check across the Gulf, the latest data suggests.

A global drop in food costs and a weak property market are helping to offset increased government spending to keep inflation in check across the Gulf, the latest data suggests.

Saudi Arabia's central bank said it expected relative price stability or a slight decline in inflationary pressures in the near term. "There are two factors that may … lead to the expectation of a relative stability or a slight decline in the inflationary pressures in the coming period," the Saudi Arabian Monetary Agency said on Sunday. "These include a decline in world food prices and relative stability in the domestic market." Despite record rises in government spending in many parts of the region since last year, inflation has been kept under control by a slower global economy and a stronger US dollar.

Inflation in the Arab world's biggest economy averaged 5 percent last year, little changed from the previous two years. Many economists expect a similar rate this year. In the UAE, inflation eased to 0.9 percent last year, and signs point to the subdued trend continuing. Dubai consumer prices dropped 0.9 percent last month from January last year, official data released on Sunday showed.

Prices fell 0.7 percent on a yearly basis, with food and housing costs the main factors in moderating the index. The dip is the first since April 2010. Prices in the clothing and footwear segment rose the most, up 4.9 percent on a monthly basis. Emirates NBD said it expected prices of those goods to fall this month as the Dubai Shopping Festival ends. "Overall, the weak inflation reading is in line with our call for inflation to remain contained this year, as last year's decline in global food prices is passed through to domestic CPI [consumer price index], and as housing costs continue to moderate," the bank said yesterday. The easing of inflation in Dubai follows a 0.3 percent dip in Abu Dhabi's consumer prices last month from January last year.